How Analysts View Snap After Earnings

Print Email

Snap Inc. (NYSE: SNAP) reported its third-quarter financial results after the markets closed on Tuesday, and it was not a good picture. This stock has struggled since its initial public offering earlier this year, and it seems like it hasn’t found a bottom yet. While some analysts are still somewhat positive on the stock, many are sidelined and don’t see it going anywhere in the near future.

24/7 Wall St. has included some brief highlights from the report, as well as what a few analysts are saying after the fact. Over the course of this week Snap shares dropped about 18%.

Snap posted a net loss of $0.14 per share on $207.9 million in revenue, versus consensus estimates from Thomson Reuters that called for a net loss of $0.15 per share and $249.45 million in revenue.

Daily active users (DAU) grew to 178 million from 153 million year over year, an increase of 25.2 million, or 17%. DAUs increased 4.5 million or 3% sequentially, from 173 million.

Average revenue per user (ARPU) was $1.17, an increase of 39% from last year when ARPU was $0.84. ARPU increased 12% sequentially from $1.05.

Merrill Lynch reiterated a Neutral rating but cut its price objective to $16. In its report the brokerage firm said:

We are still intrigued by growing user engagement and time spent, and we think Snap has potential to significantly grow user monetization. However, deceleration of user growth, competitive concerns, usage monetization uncertainty, and volatility due to absence of Street expectations management are overhangs that are likely to continue. We continue to favor Facebook in the social sector, reiterate our Neutral rating on Snap, and lower our PO to $16 based on lower user monetization estimates ($43 ARPU vs $45 previously) in our DCF. As for near-term valuation support, applying 5x (comps at 5x on 2018 revenues) to our 2020 revenues estimate would yield $10.

In terms of its investment rationale, Merrill Lynch believes that Snap is a top mobile play and is still early in its opportunity to benefit from smartphone proliferation. The firm is constructive on Snap’s demographics and high engagement, however remain cautious on upside versus peers, given slowing user growth, high U.S. saturation in its core demo and intense competition. The firm believes the company has high monetization potential, given the concentration of its user base in core ad markets.

Analysts had this to say following the report:

  • Oppenheimer cut its price target to $14 from $16.
  • Citigroup raised its price target to $14 from $13.
  • Barclays has an Equal Weight rating and cut its target to $11 from $13.
  • Canaccord Genuity has a Sell rating and cut its target from $15 to $12.
  • Credit Suisse has an Outperform rating and cut its target to $17 from $20
  • Deutsche Bank lowered its price target to $11 from $17.
  • JPMorgan downgraded it to Underweight from Neutral and cut its target to $10 from $14.
  • Moffett Nathanson cut its price target from $8 to $7.
  • Pivotal Research cut its price target to $8 from $9.
  • Stifel downgraded it to Hold from Buy and lowered its target to $13 from $18.
  • UBS downgraded it to Sell from Neutral and lowered its target to $7 from $12.
  • Wedbush cuts price target to $9 from $12.

Shares of Snap traded at $12.50 on Friday, with a consensus analyst price target of $14.78 and a 52-week range of $11.28 to $29.44.